President’s Economic Report Doubles Down on Tax Credit for Working Poor

That the poverty rate has fallen nearly 40 percent since 1967 was well documented upon the 50th anniversary of Lyndon Johnson’s War on Poverty, back in January. Yet buried in the 410-page 2014 Economic Report of the President, which the White House Council of Economic Advisers released on Tuesday, is a chapter that dives a little deeper into the changes in poverty over the last five decades.

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For starters: That 40 percent reduction in poverty? It has nothing to do with a more robust workforce or equitable economy and everything to do with government programs like SNAP and tax credits like the Earned Income Tax Credit (EITC) and Child Tax Credit (CTC).

The report elaborates:

Over this time period, expansions in tax credits that support working families have led the Earned Income Tax Credit (EITC) and the refundable Child Tax Credit (CTC) to lift more children out of poverty than any other Federal program. Expansions of the EITC and the refundable CTC enacted during this Administration benefit 16 million families with 30 million children and have helped keep about 1.4 million Americans out of poverty. Altogether, the EITC and the refundable CTC now support 32 million working families, lifting 10.1 million people, including 5.3 million children, out of poverty. Excluding the effects of these programs, poverty would be slightly higher than it was in 1967.

I wrote last week about President Obama’s proposal to expand the EITC, a refundable tax credit that helps buoy the working poor. The Council of Economic Advisers echoes this proposal in its report.

An expanded EITC is helpful even in a strong economy. The booming years of the 1990s, when poverty fell from 20.7 percent in 1993 to 14.6 percent in 2000, gave many low-income families “a strong boost,” in the parlance of the Economic Report, and increased the market value of the EITC. And a stronger EITC “leveraged this upswing in the labor market to further encourage work and channel even more resources to low-income working families.”

Critics of the EITC call it a handout, but it’s worth mentioning that the tax credit is predicated on working. It is specifically for low-income members of the workforce who don’t make enough to live on, despite holding down a steady job.

The rest of the given chapter in the Economic Report, subtitled “The War on Poverty 50 Years Later: A Progress Report,” explores both the effects that anti-poverty programs have had and how to strengthen them. There’s a lot to take away, from creating better access to affordable health care to the role of education in fighting poverty. The bones of the argument, however, remain constant throughout: Most of the progress in reducing poverty in the U.S. comes as a direct result of government programs.